According to analysts at Kelley Blue Book, the average transaction price for light vehicles in the United States is hovering around $37,500.
Even if you’re willing to spend this much on a new car – or more – it doesn’t mean you should make a foolish financial decision.
There are various factors to consider when answering the question of how much you should spend on a new car. Here are a few things to keep in mind:
The cost of a car loan: Unless you’re lucky enough to secure zero percent financing, this is something to strongly consider. The higher your interest rate, the more you’ll pay each month. This also impacts the total cost of your loan.
Insurance: If you’re trading in your old vehicle for a new one, there’s a very good chance your insurance premium will increase. Don’t make a purchase until you first receive a quote from your insurance company.
Gas: Even though today’s vehicles are more fuel efficient than ever before, this doesn’t hold true across the board. Think long and hard about the financial impact of a vehicle’s gas mileage. If you drive a lot of miles, a fuel efficient vehicle can save you hundreds upon hundreds of dollars (if not more).
Maintenance: Some brands are well known for durability and longevity. Others, however, have a reputation for requiring quite a bit of maintenance. Not only should you consider reliability, but you should also learn more about repair costs. For example, German vehicles are known for being among the most expensive to repair.
There is no right or wrong answer as to how much you should spend on a new car. Instead, base your decision on the details above, as well as how much you can comfortably afford to spend. You don’t want to bite off more than you can chew, as this may lead you back to a local dealership in the near future.